Greek tragedy

Eight years ago, Greece became the first EU member to be granted a Eurozone-IMF bailout package in a bid to keep it in the single currency. Back then, experts were balking at the prospect of lending the Mediterranean nation upwards of $30 billion to a potentially staggering $65 billion by the end of 2010. As things turned out, these were excessively conservative estimates. The final sum totalled $147 billion.

The Greek people were not best pleased; to put it mildly. Indeed, many took to the streets at the time in a bid to urge the then government of Prime Minister George Papandreou to reject a package that represented history’s largest ever sovereign bailout; bringing with it severe austerity cuts. Yet the premier was warned that the matter must not go before a national referendum.

Fast-forward to the present and Greece owes the EU-IMF a whopping $360 billion.

Of course, there are those who are keen to point out that the rescue deal has prevented Athens from going bankrupt. But the question remains: at what cost? After all, an overwhelming $265 billion — 75 percent of the amount borrowed — was earmarked towards repaying the initial loan. Interest included.

This has prompted financial analysts to speculate about the true objective of the deal. Many have since concluded that it was designed not so much to avert the risk of the liquidation of the Greek economy but to safeguard the German and French lending banks. Particularly given how these were held responsible for creating a private credit bubble as they continued to prop up the fragile Athens economy; which had adopted the euro back in 1999. And this, say pundits, is what sparked the financial crisis. Not excessive public spending.

Nevertheless, the end result is a crippled economy that has been forced, for example, to slash healthcare by half during the last eight years. In fact, just 5 percent of the money borrowed has entered the Greek economy by way of government spending. Thus pundits are now calling for the country to be given the rest of this century “off” to service its debts by way of lowering taxes to stimulate growth.

Whatever the outcome, the Greek tragedy serves as a timely reminder to countries like Pakistan that intermittently turn to global lending institutions to ‘save’ the day. The IMF and other bailouts are not without their costs. However hard that truth is to swallow. *